JPMorgan raises Bitcoin production cost to $45,000.
Slower hashrate decline after halving event impacts cost.
Long-term cost expected to trend closer to $42,000.
JPMorgan analysts have revised their estimate for the cost of producing one bitcoin to $45,000, citing recent changes in the Bitcoin mining hashrate. This update comes after the quadrennial halving event, which reduced the block reward for miners by 50%. Previously, the bank’s analysts, led by Nikolaos Panigirtzoglou, projected a production cost of $42,000. However, they now acknowledge that ongoing adjustments in hashrate and mining efficiency have necessitated a revision.
JP Morgan analysts noted in a Thursday report that the current bitcoin production cost estimate stands at $45,000 and $42,000 level for the medium term. Bitcoin prices will have limited upside ahead due to the limited inflow into U.S. spot bitcoin ETFs and lackluster demand for…
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JPMorgan initially anticipated a significant decline in hashrate following the halving. This decrease was expected as miners with less efficient equipment would become unprofitable and exit the network. However, the actual decline in hashrate has been more gradual than anticipated. Consequently, the current hashrate and power consumption levels suggest a higher central estimate for the production cost, currently set at $45,000. Despite this upward revision, the analysts maintain their medium-term price target of $42,000 for production costs.
Mr. Panigirtzoglou emphasized the dynamic nature of production costs, which are influenced by both hashrate and mining equipment efficiency. The current $45,000 estimate is subject to change as the network adjusts to the post-halving environment. The team expects the production cost to trend closer to the $42,000 mark once the hashrate stabilizes and mining efficiency improves.
The recent launch of the Bitcoin Runes protocol provided a temporary boost to transaction fees, offering miners some relief after the halving. However, this increase proved short-lived, with user activity and Runes-related fees dropping significantly in recent weeks. This highlights the ongoing challenge for Bitcoin miners in securing stable revenue streams, particularly in the post-halving environment.
A decline in power consumption exceeding the hashrate decrease suggests an exodus of less efficient miners. The analysts view this as a natural feedback loop tied to Bitcoin prices. When the price falls, unprofitable miners are forced to leave the network, leading to a reduction in overall computing power for mining. This, in turn, contributes to a lower cost of bitcoin production. As of press time, Bitcoin is trading at $65,634.85, with a slight decline of 0.15% over the past 24 hours.
The revised production cost estimate by JPMorgan underscores the intricate relationship between Bitcoin mining and market dynamics. While the short-term cost may be slightly higher than previously anticipated, analysts believe long-term efficiency improvements will eventually bring it closer to their initial projection. The success of Bitcoin as a digital asset hinges on the ability of its mining ecosystem to adapt and evolve alongside market fluctuations.
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